Dyson and EVs

Dyson announced yesterday that it’s planned foray into Electric Vehicles was no longer commercially viable. The original investment was expected to be £2-2.5bn.

EVs are no more for Dyson, it seems, but it’s still going to press ahead with its investment in batteries, particularly solid state varieties. If I recall correctly, about half of the original investment was for the car itself and half for batteries – so this is still an investmnet of over £1bn in new capabilities (those batteries could still supply cars for other manufacturers of course, or could be solely for Dyson’s current and any future products).

Why decide this now?

Subsidies for EVs have been reduced across the world (recently in the UK but, particularly in China, the largest current market). Do Dyson see fewer buyers, despite the near universal commitments governments have made to take petrol and diesel cars off the road over the next 2-3 decades? That seems unlikely.

Is a £2.5bn investment not enough? Tesla has consumed more than £14bn to date, and not made a profit. VW is expecting to spend $33bn over the netx few years. Joint ventures, mergers and deals between car manufacturers, “taxi” firms (such as Uber and Lyft) are proceeding at a pace. Perhaps Dyson couldn’t keep up with the expected spend rate?

Cars are hard. Are they too hard for a new entrant? It’s a volume game, for most companies at least. 87m cars were sold globally in 2018. Tesla is shipping only (I say “only” in a relative sense) 100,000/quarter (or thereabouts, with ambitions for more). Perhaps Dyson think it’s not commercially viable in the short term – that the hockey stick of demand is too far away for investment now?

Did they pick the wrong place? Singapore is not known for its car manufacturing. It’s an expensive, though stable, location to pick. Maybe it was the wrong place to setup a cost effective and efficient factory?

It could, and probably is, all of these. The ROI profile must look daunting, especially in an uncertain market where realistic large scale take up is a decade away (at the mass market, global level – the point of pickup in volumes is perhaps 3-5 years away).

Perhaps the most important point is Dyson went all in, quickly. And then all out, quickly. He saw an opportunity and funded it, but then saw that it wasn’t going to pan out as planned, and so pulled the funding. J

This strikes me as the mind of an instute businessman, used to carrying out experiments, working at full capacity

– He saw an opportunity and allocated investment capital to it. We don’t know how much of the £2.5bn has been spent, or is wasted effort, or can’t be unwound of course.

– Early in the experiment it was clear that there were significant hurdles, e.g.

Car safety, with people travelling at 70mph+, comes with different regulations than his existing portfolio, for instance)

Long payback (governments cutting subsidies, adoption still slow, proposals to halt sales of petrol and diesel still two decades away)

And so he reviewed his investment/experiment and decided it would take more time and money than he wanted to commit. Could he have figured that out by commissioning studies to assess feasibility and so on? Sure he could, and maybe he did and that’s why it’s been cancelled, but the way of the engineer is to start building it and see whether it will work, and it sounds to me that that’s how he approached it.

Just as I’ve written here before, projects fail. They fail all the time. The trick is to see the failure coming, be sure it’s really failing and can’t be picked up, and that it’s not failing becuase of an elementary error (that is, you have learned the lessons that others learned before you), and then address that.

It’s a bold decision. And his investments live to make a return another day. Does this mean anything for the overall move to EVs though? Seems unlikely – it’s evidence that new entrants will struggle and reinforces why partnerships are increasingly the thing both within the existing motor industry and for those trying to break in.